Discussing changes around the removal of the “take any other step” catch-all provision in the safe harbour steps, the joint licensee group submission said its removal could have numerous benefits for the advice profession and their clients.
The seven members of the joint licensee group are WT Financial Group, Fortnum Private Wealth, AMP Advice, Rhombus Advisory, Diverger, Otivo, and Infocus Wealth Management.
The “take any other step” provision states that an adviser must “take any other step that, at the time the advice is provided, would reasonably be regarded as being in the best interest of client, given the client’s relevant circumstances”.
This provision has led to escalating costs, the group said, thanks to the need for extensive documentation and compliance checks, which has increased the cost of advice for the consumer. Rather than being able to answer simple questions, advisers say they now feel compelled to unnecessarily broaden the scope of their investigations in order to avoid non-compliance with the steps or with best interests duty.
Removing this provision would still maintain the continued objective of giving appropriate advice but remove unnecessary legal complexity.
“The ‘take any other step’ provision has significantly disrupted the natural course of commercial negotiations between clients and their financial advisers. This provision, by its very nature, implies an exhaustive and all-encompassing approach to financial advice, often extending beyond the client’s actual needs or desires,” it said.
“The ‘catch all’ provision in its current form does more harm than good, hindering the delivery of high-quality financial advice and unnecessarily inflating consumer costs. Its removal is a crucial step towards a more efficient, effective and consumer-focused financial advice industry.”
It would also have the knock-on benefit of reducing the costs of professional indemnity (PI) insurance, which has been identified as a significant cost for advisers. The provision currently creates uncertainty that makes it difficult for PI insurers to assess and underwrite risks which led to higher premiums for advisers to pay.
In Michelle Levy’s Quality of Advice Review recommendations, she identified that the cost of PI insurance was frequently raised by advisers as a matter affecting the cost of advice and viability of their business.
A report by the Australian Prudential Regulation Authority released last July, found financial planners have seen an average premium increase of at least 40 per cent in their PI insurance since 2015.
The group’s submission said: “This change is likely to ease the concerns of underwriters, leading to more favourable insurance terms and potentially lower PI insurance costs for advisers. The reduction in PI insurance costs will not only benefit advisers but also contribute to lowering the operational costs of providing financial advice, indirectly benefiting consumers as well.
“Furthermore, a more stable and confident PI insurance market will enhance the overall health of the financial advice sector. It will provide a firmer foundation for advisers to operate with greater security and focus more on delivering high-quality, client-centric advice.”
Hullalujia, a potential drop in a cost, which very likely won’t go through because advisers will be Choice’ and Super advocates’ scapegoat AGAIN to say we’re trying to reduce consumer protection, without even understanding how bid is meant or what it means practically.
Because the FAAA are too busy rubbing their hands at the thought of a member increase from (in) qualified advisers to educate commentators on what BID means. Perhaps the contractions in membership might stop if they, you know, advocated and had and effect in supporting our profession?
On the topic of mandatory junk PI, why is it needed at all if csolr is there and afca and ASIC levy and FSCP costs via the levy? Why can’t we have group cover through professional bodies, like you know, all other professions? Even mortgage brokers have group cover, low cost aligned with code of conduct which is less strict than fasea and about 10k less per rep?
Alan Kirkland will block this for sure (would love to see the process for hiring ASIC commissioners btw).